Gold's correction is not over yet; could $3,500 become a key support?
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The gold market's battle between bulls and bears has entered a critical stage. Technical indicators show lingering downward pressure, but central bank gold buying remains strong, and institutions are clearly divided on the medium-term outlook for gold.
Bank of America (BofA) points out in its latest analysis that gold is currently in a downward channel, with a "death cross" signal indicating further downside, but the TD Sequential indicator suggests a potential trend reversal. The bank believes this round of correction has lasted only 24 weeks, compared to the previous uptrend which lasted 121 weeks, indicating the correction cycle may not be over yet, with the $3,500 range seen as a critical support level.
Meanwhile, Goldman Sachs estimates central banks bought 81 tons of gold in May, considering central bank gold buying will provide a price floor to offset the short-term downward pressure from hawkish Federal Reserve expectations.
Weak technical signals, $3,500 as a key defense line
Bank of America's latest technical analysis shows gold remains in a downward channel, and a “death cross” pattern has already formed, with the short-term technical outlook remaining under pressure. However, the bank also points out the TD Sequential indicator has issued a potential reversal signal, suggesting gold prices may be approaching a phase adjustment window, and bearish forces don't fully dominate.
BofA states that since 2000, the channel line in gold's long-term movement has been an important technical pivot. Currently, the support area is gradually moving to the vicinity of $3,500. The bank sees the current correction cycle as possibly not yet ended. Compared to the previous uptrend lasting about 121 weeks, the current correction has only lasted around 24 weeks, so the correction period may still continue, and gold prices may remain volatile before confirming a medium-term bottom.
Source: Bank of America
Central bank gold buying becomes an important support
Despite weak technicals, ongoing central bank gold buying has become an important support for the gold market. Goldman Sachs’ latest model shows global central bank gold buying in May is expected to reach 81 tons, and after seasonally adjusting for 3 months, the monthly average is about 67 tons—much higher than the historical average of about 17 tons before 2022.
Goldman Sachs points out recent central bank gold buying forecasts have rebounded. The bank believes that in the context of the Fed’s hawkish expectations putting short-term pressure on gold prices, central bank demand will provide key price floor support for gold.
BNP Paribas notes that in March, official sector gold holdings showed the first net sale in 14 months. However, the bank believes this change is more likely a short-term anomaly, rather than a reversal of the central bank gold buying trend.
Source: GIR
Divergent capital sentiment: Futures bullish, options seek protection
Capital flows show increasing divergence within the gold market.
Bank of America data shows that although gold prices have retreated from the highs at the start of 2026, net long positions in futures remain at relatively high levels as a proportion of open interest. BNP Paribas reports that during gold’s June correction, fund investors began buying on dips and net speculative long positions recovered, indicating some funds still bet on a medium- to long-term uptrend in gold.
However, the options market sends more cautious signals. The bank points out that since March, funds have tended to buy put options on gold, indicating investors are using options strategies to hedge downside risks, and that at least in the short term, the market is not fully optimistic about further price increases.
Source: BNP Paribas
Inflation logic recedes, debt pressures strengthen gold's long-term allocation value
From a macro perspective, BNP Paribas believes the traditional "inflation hedge" logic for gold is changing.
The market now focuses more on high inflation expectations potentially keeping rates high, rather than seeing inflation itself as a simple reason to buy gold. This also explains why, even as energy prices push up inflation expectations and the market reprices Fed policy, gold has been under pressure.
However, the bank believes U.S. fiscal conditions are becoming a long-term support for gold. Since July 2025, America's public debt has increased by about $3 trillion, worries about the sustainability of U.S. debt may continue to drive investors to allocate assets to gold.
Additionally, the correlation between gold and U.S. equity assets is changing. For most of 2024 and 2025, gold and U.S. stocks showed a positive correlation, but entering 2026, the correlation turned negative again, and gold’s hedge attribute is re-emerging in asset allocation.
Source: BNP Paribas
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